20180510Carlock Settlement Direct.pdf

BEFORE THE
IDAHO PUBLIC UTILITIES CÒMMIŠSI
IN THE MATTER OF THE APPLICATION )
OF ROCKY MOUNTAIN POWER FOR A )CASE NO.PAC-E-17-07
CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY AND )
BINDING RATEMAKING TREATMENT )
FOR NEW WIND AND TRANSMISSION )
FACILITIES )
NON-CONFIDENTIAL SETTLEMENT TESTIMONY OF TERRI CARLOCK
IDAHO PUBLIC UTILITIES COMMISSION
MAY 10,2018
1 Q.Please state your name and address for the
2 record.
3 A.My name is Terri Carlock.My business address
4 is 472 West Washington Street,Boise,Idaho.
5 Q.By whom are you employed and in what capacity?
6 A.I am employed by the Idaho Public Utilities
7 Commission as the Utilities Division Administrator.
8 Q.Please outline your educational background and
9 experience.
10 A.I graduated from Boise State University in
11 1980,with B.B.A.Degrees in Accounting and Finance.I
12 have attended various regulatory,accounting,rate of
13 return,economics,finance,and ratings programs.Since
14 joining the Commission Staff in May 1980,I have
15 participated in audits,performed financial analysis on
16 various companies,participated in numerous proceedings,
17 and have presented testimony before this Commission.
18 Q.Please describe the scope of your
19 responsibilities in the preparation of this case.
20 A.I am responsible for coordination of Staff
21 positions.I acted as the Staff lead in the Settlement
22 discussions and am presenting the testimony in support of
23 the Stipulation filed with the Commission on May 8,2018
24 between the Company and Commission Staff in this
25 proceeding.The Stipulation recommends a Certificate of
CASE NO.PAC-E-17-07 CARLOCK,T (Di)105/10/2018 STAFF
1 Convenience and Necessity (CPCN)be issued and resolves
2 all but one issue between the Company and Staff.Staff
3 believes the Stipulation provides benefits for Idaho
4 customers by mitigating risk factors and limiting costs
5 to be paid by customers in rates.
6 Q.Please identify the final projects covered by
7 the Stipulation.
8 A.The final projects include transmission and new
9 wind projects.The transmission project covers the
10 Aeolus-to-Bridger/Anticline 500 kV transmission line and
11 the New Wind projects include the Ekola Flats,TB Flats I
12 and II,and Cedar Springs wind projects.Together they
13 are referred to as the Stipulated Projects.
14 Q.Please explain the benefits provided by the
15 Stipulation Provisions.
16 A.Every provision in the Stipulation is important
17 but I will summarize and discuss three main categories
18 that create customer benefits:
19 The Resource Tracking Mechanism (RTM)
20 Limitations cover many provisions limiting risks and
21 costs.
22 The Production Tax Credit (PTC)Guarantees
23 assure savings flowing from Federal Tax Incentives
24 are realized by customers.
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CASE NO.PAC-E-17-07 CARLOCK,T (Di)205/10/2018 STAFF
l The Operational Guarantees reduce the risk
2 of not generating power for use in the system,off-
3 system sales,and the receipt of PTCs based on full
4 generation capabilities.
5 Q.Please explain the Resource Tracking Mechanism
6 and the limitations imposed in the Stipulation.
7 A.The RTM is the same mechanism authorized in
8 Order No.33954 on the Repowering Projects for existing
9 wind sites in Case No.PAC-E-17-06.The Stipulated
10 Projects in this agreement have more limitations imposed
11 in the RTM and will be tracked separately from the
12 Repowered Projects.The greater limitations are
13 important because the Stipulated Projects are based on
14 economics rather than a need for generation and capacity.
15 Other Staff witnesses provide this analysis in their
16 testimonies.
17 To reduce risks that the Stipulated Projects
18 fail to provide an economic benefit for customers,the
19 capital costs that will be tracked in the RTM are limited
20 to the construction cost estimate of ,as
21 provided in the Company's Second Supplemental Direct
22 Testimony.Further,the annual actual costs will be
23 capped at the annual benefit amount for the Stipulated
24 Projects in the RTM and the Energy Cost Adjustment
25 Mechanism (ECAM).Any dollar amounts expended above
CASE NO.PAC-E-17-07 CARLOCK,T (Di)3
05/10/2018 STAFF
1 these caps must be justified by the Company and deemed
2 prudent by the Commission in a general rate case before
3 being included in customer rates.The Company will
4 include 100%of the benefits from the Stipulated Projects
5 in the RTM and ECAM mechanisms.Additionally,in
6 recognition of receiving timely investment recovery
7 through the RTM and ECAM,the Company will provide
8 $300,000 annually in a Regulatory Liability account from
9 the first Stipulated Project in-service date until the
10 next general rate case.The continued use of the RTM will
11 be re-evaluated in the next general rate case following
12 project in-service dates.
13 Q.Please explain the Production Tax Credit
14 Guarantees.
15 A.The Company will bear the risk of any portion
16 of the wind projects that do not qualify for PTCs.
17 Receiving 100%of the PTCs are a critical and required
18 component for these Stipulated Projects to be economic.
19 If the full amount of PTCs are not received,the Company
20 will impute the PTCs to each project as if received based
21 on actual production levels for each project.
22 Q.Please explain the operational guarantees.
23 A.The Company will negotiate availability
24 guarantees for the Wind Projects in any third-party
25 provided maintenance contracts,as provided by the
CASE NO.PAC-E-17-07 CARLOCK,T (Di)405/10/2018 STAFF
1 competitive market at 97 percent available generation.
2 All liquidated damages received by the Company for these
3 projects will be passed onto customers in the ECAM.
4 Q.You previously stated that this Stipulation
5 resolves all but one issue between the Company and the
6 Commission Staff.Please identify the remaining issue,
7 why it is important,and briefly state Staff's position.
8 A.The only issue not resolved between the Company
9 and Commission Staff in the Stipulation relates to an
10 overall cost cap.Staff believes an overall Hard Cap is
11 necessary to reduce the risk that these economic projects
12 do not provide benefits to customers.Staff proposed a
13 Hard Cap at the combined construction estimates of
14 as identified in the Company's Second
15 Supplemental Direct Testimony.
16 This is the same cap agreed to in the
17 Stipulation for the RTM.The economic margins are
18 limited and fairly slim as shown in Staff witness
19 Eldred's Confidential Exhibit No.104.As stated
20 previously,these narrow margins make a Hard Cap
21 essential to increase the probability that the Stipulated
22 Projects are prudent resources that are developed at a
23 reasonable and economic cost.
24 The Company has proposed a soft cap.Staff
25 believes a soft cap is inadequate and recommends the
CASE NO.PAC-E-17-07 CARLOCK,T (Di)505/10/2018 STAFF
1 Commission adopt a Hard Cap for the Stipulated Projects.
2 A soft cap is inadequate because,in spite of the "cap"
3 moniker,it is in reality just standard ratemaking
4 practice.The Stipulated Projects are recommended based
5 on the economics of these discretionary projects.The
6 Staff and Intervening Parties each testify to the lack of
7 need and economic justifications of the projects.To
8 maintain a reasonable probability that the Stipulated
9 Projects will be economic,Staff believes a Hard Cap is
10 required and is confident the Commission will also
11 identify the need for a Hard Cap.
12 Q.Does this conclude your direct testimony in
13 this proceeding?
14 A.Yes,it does.
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